The State of FinTech in Thailand

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Situated in Southeast Asian region, Thailand is a fascinating country for tourists from across the globe for its beautiful beaches and islands, unique history, rich culture, exotic food and friendly people. It shares its boundaries with Myanmar and Laos to the north, and Cambodia to the East, Gulf of Thailand and Malaysia to the South and Andaman and Malaysia to the south. According to the last official census of 2010, Thailand’s population was 65.4 million. However, various reports estimate its population in 2016 between 68 million to 70 million, out of which majority lives in rural areas. 75% of the population is ethnic Thai, 14% are Thai Chinese, 3% are ethnic Malay and rest is hill tribes.

Thailand’s economic development – moving from low-income group to an upper middle-income group economy – was remarkable with the growth rate of 7.5 % in the 1980s and 1990s. However, in the recent years, the GDP figure has remained modest with 2.8 in 2015 and projections 3.0 and 3.2 in 2016 and 2017 respectively.

The literacy rate among youth (15-24 years) is 98% and among females is 97.9%. Out of hundreds of universities and colleges, the highest ranked is Chulalongkorn University with 253rd in the QS World University Rankings in 2015/16 and 45th in the QS University Rankings in Asia 2016.

Start-up Scene In Thailand :

In the recent years, Thailand has made significant development in creating a start-up ecosystem with government’s support. Reports suggest that there was only one venture capitalist, one accelerator, and three funded startups in Thailand in 2012 but today VCs have gone up to 60, accelerators 6 and funded startups 72. (Techsauce). According to a report in Bangkok Post, the government in Thailand has announced to create a 20-billion-baht fund ($573 million) to support existing 2,500 start-up companies to accelerate innovation and expand into another Asian region.

The government has expressed its desire to increase the number of startups from 2500 to 10,000 by 2018. The government is also planning to open startup zones to promote innovation.

At present among all startup activities, e-commerce is the most popular and financial technology comes second in the preference order of investors and venture capitalist. Some of the most active venture funds, which have come forward to support startups in Thailand, are 500 startups, InVent, CyberAgent Ventures, Ardent Capital, East Ventures and Golden Gate Ventures. Various newspaper reports suggest that from 2012 to mid-2016, these VCs and some angel investors invested USD 108 million in various startups. Despite that, funding is still a big challenge more and more big companies should come forward to fund startups.

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Co-working space with good infrastructure and affordable Internet is another challenge for many youngsters who are raring to go in innovation. Some good co-working spaces have come up in Bangkok such as Busy Bees @ 115, Glowfish, Third Place, The Hive, Launchpad, Ma’D, Maker Zoo to name a few. However, other cities like Pattaya, Chiang Mai, and Phuket have a very few good co-working spaces.

How Big Is The FinTech Pie in Thailand:

Financial technology companies gained momentum in 2014 when venture capitalist showed their interest and started pumping money into it. The emergence of partnership model also gave a boost to the FinTech sector. According to statista.com, transaction value in the FinTech market in Thailand amounts to USD 6,464.7 million in 2016.

It is expected to show an annual growth rate of 19.99%, which will result in the total amount of USD 13,401.8 million in 2020. Digital payments are the market’s largest segment with a total transaction value of USD 6,440.9 million in 2016. At present, the average transaction value per user in the digital payment segment is USD 331.40.

The main reason for the digital growth is mobile penetration, which has jumped from 106.6% in 2010 to 146% in 2015. The Bank of Thailand has reported that both Internets, as well as mobile banking transactions, have grown by 32% and 62% respectively between 2010 and 2014. Though the relative growth of digital banking is slow, yet it still doing better than a lot of other Asian countries. McKinsey and Company’s 2014 “Digital Banking in Asia” report has placed Thailand ahead of India with 19% digital banking penetration while India has 18%.

Segments of FinTechs Services in Thailand:

Digital financial services which are available in Thailand include mobile payments, peer to peer lending for business as well as personal purposes, Robo-advisories, automated wealth management services, and online crowdfunding to name a few.

The country is yet to have good startups in lead-generation business model, crypto-currencies and blockchain technology, business-to-business payments, etc. Credible startups in InsureTech or Insurance related financial technologies, credit scoring, and API management have not yet emerged inThailandd.

The digital payment segment is expected to emerge big by 2020 as it is projected to have 23.4 million potential users availing various digital services, which are one-third of the population. Some of the prominent financial technology firms are Piggipo, StockRadars, PeakEngine, Flowaccount, and Finnomena to name a few. While Piggipo helps users manage their finance, Finnomena provides smart investment solutions. Both StockRadars and Flowaccount have launched large investor-centric applications.

Experts believe that mobile wallet has a great scope for speedy expansion in the near future and banks are trying to access to customers through digital banking. An Accenture study in 2015 says that 30% of bank revenue has become “fragile” due to evolving customer habits so they should offer deposits, withdrawal and lending facilities through the digital medium. The reports suggest that banks start with small transactions through the mobile wallet and then go on to offer complex products.

The fast growth of e-commerce is also helping online payment platforms to grow, and non-banking institutions are doing everything to cash in on it. Companies like Omise, Vocal Link, have been growing fast with the growth of e-commerce. This has become a big cause for concern for financial institutions. Experts believe that these online payment platforms are forcing banks to go digital in payment segment for their survival.

Status of policy regulation:

To protect the interest of the consumers, the central financial regulator, Bank of Thailand (BoT) has stressed the need for registration of all FinTechs with it. Banking regulators also stress the need for the enactment of Payment System Act, which will help regulatory authorities keep a watch on all electronic transactions and verify clients’ credentials. Government plans to allow P2P lenders to become the member of National Credit Bureau so that they can access the consumers’ credit data. Along with this, the government is also contemplating to relax the rules, which will allow banks to invest in FinTechs.

The positive side of BoT’s regulatory initiative is that it wants to provide a ‘sandbox’ environment, which will give freedom to startups to carry on their investment without bothering about stringent regulations.

Expert’s view that regulation should keep pace with the fast-moving world of financial technologies only then it can nurture the innovation in this field. The regulators and startups should work together in close cooperation to develop a better regulatory mechanism because every startup aims at finding out the solution and simplifying people’s problems. Some startups working in the areas of investment analysis platform say that getting the license to operate is the greatest challenge but along with that comes another uphill task to win the trust of people to adopt the upcoming technology. While the government should take care of the former by simplifying and relaxing the licensing norms, the FinTech and financial institutions should work together to overcome the initial challenge of trust deficit.

Startup Incubation scene in Thailand:

Good startups are still a challenge in Thailand, and financial experts view that along with banks, big corporate groups should come forward to build incubators and accelerators to mentor startups. It will go a long way in bringing a FinTech eco-system in the country.

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At present, the link between the angle investor and startups seem to be missing, as a lot of investors don’t know anything about FinTech business. In addition to this Thailand needs more Incubators and accelerators for facilitating early adoption of emerging ideas. Some banks have come forward to fund startups to leverage their benefits. For instance, in a recent move, Siam Commercial Bank has formed a subsidiary firm Digital Ventures through which it has decided to invest $50 million funds in various new financial technology companies. It will also allocate some fund for its startup accelerator DV Accelerate.

Some of the well-established incubators and accelerators in Thailand are Software Park Incubator, True Incube (partnered with 500 startups), DTAC Accelerate, AIS The StartUp, National Science and Technology Development Agency’s Business Incubation Center, Mseed, I4-X Accelerator, TechGrind Thailand Incubator and AIS Startup.

Current status of financial institutions:

The growing influence of FinTech companies can be measured from the fact that some of the commercial banks have requested the BoT to close down their branches because FinTechs have taken over their roles. Since the FinTechs have reduced the service cost of various operations and have brought inconvenience in banking facilities, they are gaining acceptance and popularity among the masses.

Taking a cue from the changing scenario, banks also want to capitalize on the digital revolution. In January 2016, the Thai Bankers’ Association (TBA) announced a new five-year strategy to emphasize five themes – digitization and next-generation payment infrastructure, financial inclusion, and contribution to society, regional integration, and legal and regulatory enabling. Along with this, TBA has also planned the development of payment system roadmap, publication of common standards and the establishment of shareable payment infrastructure. The strategy is based on the fact that by 2020 60% transactions will become cashless from the current 30% and electronic payments will go up from current 30% to 70%.

Opportunities in Thailand for FinTech Startups:

The FinTech revolution opens up tremendous job opportunities in the financial service sector in the country. With one of the lowest unemployment rates in the world and culture of being in business, mobile and e-payments could be one the fastest growing segments in Thailand. Opportunities galore in Thailand and the startups that move the needle know can even become Unicorns in future.

Conclusion:

According to the global agency, “We are Social” November 2015 figure, out of 65.1 million population, 35 million are internet users, 38 million are social media users, 97.1 million have mobile connections and 34 million are mobile social users. The data is clearly indicating a rapid growth and success of Fintech ventures such as mobile money and e-payment system in Thailand. If the government and corporate come forward to fund and nurture more and more new innovative ideas, Thailand can be the next competitor of Singapore in FinTech revolution.

Alex Kong

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